New doctors tend to become employed physicians

Much has been written on the death of private practice.

A lion’s share of the reason is economic.  It’s becoming financially unfeasible to run a private practice and practice medicine at the same time.  The increasing bureaucracy and regulations will only get worse.

And many doctors are responding by becoming employed by hospitals or by large, integrated health practices, and giving up some independence.

Some will continue to resist this trend.  But others, especially the next generation of physicians, will not.

A recent New York Times piece details the prevailing attitude of incoming doctors.  The piece, focused on new emergency physician Kate Dewar, is how new doctors generally prefer a more balanced work-life schedule.

When telling her father that she accepted a salaried position,

her father also remembered being both envious and disappointed. “On the one hand, it bothers me that the generation of doctors that my daughter is in doesn’t work as many hours and isn’t willing to do the stuff that I did,” he said. “On the other hand, I’m almost a little jealous.”

Such mixed feelings are common among older doctors, many of whom have been unable to sell or even give away their practices because younger doctors are not willing to work the hours required. Indeed, Dr. William Dewar III’s practice has hired nurse practitioners recently, in part because it cannot recruit doctors.

Large conglomerates of employed physicians will soon become the dominant model of care in the United States.  This change is not only coming from the top down, but from the bottom up as well.

 is an internal medicine physician and on the Board of Contributors at USA Today.  He is founder and editor of KevinMD.com, also on FacebookTwitterGoogle+, and LinkedIn.

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  • http://hokiemd.blogspot.com Christopher Bayne

    Somewhat off-topic, but I wonder if some of the outrage over the new 16 hour-day restrictions is a little bit of jealousy, too. Thanks for the read.

  • http://natickpediatrics.net Rob Lindeman

    Thanks for this, Kevin,

    To readers contemplating private practice: It depends how badly you want to do this. I would amend Kevin’s first premise to say that it’s economically DIFFICULT BUT NOT IMPOSSIBLE. I started a primary care pediatric practice, 9 years ago, with zero patients, in a competitive market. And I’m still standing.

    If you don’t want to struggle, don’t do it.

  • http://www.hostetlermgt.com Keith

    Don’t skimp on management and business planning. Physicians ARE smart enough to run a business but sometimes not smart enough to figure out it is better to pay someone else to manage it and maintain their sanity. Loss of autonomy is very expensive and it cannot be gained once it is sold. How many local businesses do you know running $4 million through the door and being run by the girl in your class who graduated “most likely to be a receptionist?”

  • family practitioner

    I am leaving private practice after almost 10 years. Built practice from scratch. Other colleagues tried the same but literally went out of business. Never did well financially. Best year I made 150,000; most years, I made 130,000. Kids just done with residency are getting started at 160-180,000. Got kids in high school, soon to go to college, no money saved.

    Now, I am leaving for an employed position. Significantly better pay. Better hours. No administrative burdens. Am I giving up anything, like tright to set my own hours, etc? Who cares? Give me my paycheck, and then I go home.

    Young doctors are not stupid. Primary care private practice is dead. Why work harder and get paid less? Only a fool would take that deal.

  • ninguem

    You have a private primary care practice. You have a receptionist in front, a nurse or MA in the back, maybe someone doing the billing and other management, or maybe you keep it in-family if solo.

    The MGMA says a primary care doc, on average, has 4.5 employees per doctor.

    Where is that 1.5 employees in the solo practice?

    There is no economy of scale in the larger practices, and especially the hospital-owned practices. In fact, there is LESS efficiency. That 4.5 employee thing from the MGMA reflects the fact that they’re looking at large practices, and gathering data. They don’t survey small practices, they just extrapolate.

    I don’t deny the $130-150K versus $160-180K thing. All I’m saying is the money does not come out of thin air, and it does NOT reflect superior management by the big places.

    It can reflect bullying. It can reflect HIGHER charges. They can charge facility fees and various dodges to extract higher payment for the same work. The use unethical noncompetes to make sure there is never any local competition. They can coerce the primary care docs to utilize the hospital’s lab, imaging, and their specialists, even if not the best choice. Some small amount of that extra money filters back to the primary care doc.

    I understand why doctors take employed positions; but it does not lower healthcare costs, in fact it’s the opposite. Cost goes up.

    • Leo Holm MD

      Large systems operate Primary Care at a loss intentionally in order to capture larger populations to plunder for higher paying procedures and hospitalizations. This also has the secondary effect of running private practice and smaller practices out of business. In the interest of “downstream revenue” health care costs are definitely increased. Unfortunately, patients are paying the price for the loss of the independent Primary Care Physician.

      • family practitioner

        “This also has the secondary effect of running private practice and smaller practices out of business.”

        You are wrong. Private and smaller practices are run out of business by 3rd party payors that force them into lower reimbursement because they have no negotiating clout. It is not uncommon for smaller practices to get 80% medicare while large groups get 140%.

        • Leo Holm MD

          I’m not sure I am wrong, but your point is also correct. You have to admit that large systems can run clinics at a loss while smaller practices cannot. The unfair payment system exacerbates the problem and does not reflect the values of patients. The “negotiating clout” you mention should not be justified as a reason to pay one physician more than another. This will ultimately drive rural practice to extinction and the rest of the physicians will be working at Wal-Doc.

  • family practitioner

    Why should I be the only one to care about keeping health care costs down when I am losing money?

    Bigger groups get signficantly better reimbursement. There is no way that I, a lowly solo family physician, can level that playing field. And with the trend towards ACO’s, bundled payments and payment for quality, it will only get worse.

    I employ less than 4.5 people per doctor, not because I do not need them, but because I cannot afford to. And my loyal employees work harder than they should for less money.

    It is a lose-lose for everyone involved.

    How long, Ninguem, have you been practicing? Doctors who were able to start up in the 70′s and 80′s were at least able to get their sea legs. They also have less debt. Those of us who started in the late 90′s and 2000′s never had a chance.

  • Matt

    I think it’s worth noting that current medical graduates don’t just want to avoid working long hours, but that they recognize that the payoff for working hard isn’t available anymore in medicine the way it was in the past. “Work-Life Balance” is used as an excuse when either the work sucks, or the payoff for doing the work is non-existent.

  • http://onhealthtech.blogspot.com/ Margalit Gur-Arie

    Primary care is a loss-leader for large multi-specialty groups and hospitals. It’s a business expense for creating referrals to the much more lucrative specialist and hospital based services.
    True, the pay is better now, but as more and more PCPs become employed and the alternatives start disappearing, who is to say that wages are not going to be reduced? And since most arrangements have non-compete clauses attached, unless you are willing to move half way across the country, you will have to accept the pay cuts.

    The much touted economies of scale are pure fiction because I believe the 4.5 average number of staff from MGMA includes the 2 and 3 numbers from small and solo practices in the calculation, which tells me that the true numbers for large groups is more around 5 staff per physician.

  • soloFP

    Very good comments. I am a solo FP and offer competitive prices to my patients that are close to and often lower than the fast clinics to self paying patients. My insured patients get lower fees, as the one way negotiated contracts force me to accept lower fee but do save the insured patients money on their deductibles. I work an average of 60 hours a week.

    It took about 3 years to build a strong practice and around 5 years to exceed the national average FP salary. I have 1 and 1/2 employees and a very low overhead.
    95% of my colleagues are in groups, with 70% of them employed by hospitals. The standard hospital-backed overhead is 65% for primary care and a collection rate of only 80% of allowable charges. Their fee schedules and actual insurance fees are higher than mine, but their collection rate is a lot lower than mine. The two main hospital groups in town use a centralized billing agency with an average turnaround of 2-3 weeks on inpatients and 1-3 weeks on outpatient claims. I am more likely to work with a patient on a payment plan and rarely discharge a patient for financial reasons. The local hospital groups will discharge a patient for one no show or for not paying a $5 copayment. I don’t use a collection agency, and the local hospital groups will send $10 to collections.

    One reason it took me years to build a practice is that the local hospital groups keep the patients within their group. The employers are willing to take a loss with each primary care practice having 3 MAs, a receptionist, and an office manager. They add two MAs and one more receptions per NP or PA to the equation. Where the group and hospitals make their money is through excessive ordering of CTs, MRIs, echos, stress tests, PFTs, and labs that magically are drawn or done at the hospital employer or through one of the group’s specialists. They are smart enough to use separate tax IDs to fool Medicare, so that the radiologists appear to be separate from the main primary care group but are employed by the hospital. Referrals for almost every condition are to specialists within the same group. The employed primary care docs are known as managers in my area, as they refer most conditions to specialists. Another way they get around Stark is to maintain their privileges only at the hospital that employs them.

    A few independent radiology and lab centers are in my area. The savings to the patients range from 40-80% cheaper than the hospitals for the same or better quality of care. The employed docs cost their patients more money is overutilization of the system and not helping the patients shop around for competitive prices. The high overhead is made up in referrals and testing within the system. This simply contributes to the costs of medical care.

  • John Ryan

    Reading the comments above, how can the pinheads running the show in Washington, and our obtuse national medical organizations continue to support ACA — which is predicted to doom small independent practices, raising costs? Answer: they don’t really want health reform to succeed. In desperation, we will eventually have to accept healthcare as another government department.

  • http://www.MDWhistleblower.blogspot.com Michael Kirsch, MD

    I’m in private practice, but hardly have autonomy, but I enjoy more control than my employed colleagues. The reality is that the viability of my practice is subject to many external forces that I cannot control. Where will I be in 5 years? Hard to say.

  • CSmith MD

    Patients can pay an annual/quarterly fee to be a part of an independent practice and will be willing to do so if they perceive the value. $100-200 / year is not prohibitive for most people and augments income well over $100,000. As a matter of fact, insurance companies would be wise to pay this for their patients. Employed PCPs cost insurance companies much more money as the negotiated reimbursements and ancillary fees are much higher.

    • family practitioner

      “As a matter of fact, insurance companies would be wise to pay this for their patients.”

      They would be wise to pay us better overall; then maybe we would spend more time interviewing, examining and counselling patients rather than referring, prescribing and ordering.

      Just because it seems logical to us does not mean it will be agreed to by the insurance companies. Logic went out the window a long time ago.

  • Marc Gorayeb, MD

    Primary care physicians once had power and authority over hospitals, and the respect of specialists. It’s the reverse now. Before you sell out, think about forming an association with your fellow independent primary care providers. There are no impediments to forming a super-group of primary care physicians that can’t be overcome. If the hospital can legally attempt corner the market, then so can you. There are different ways of structuring an association depending on your local circumstances. Don’t believe the B.S. about being nothing more than a “loss-leader.” No matter where you turn, others seeking the power of your pen are attempting to de-value you as a professional. Instead of giving up, consider getting in the game.

  • http://www.texmed.org Steve Levine

    Yes, new physicians do tend to become employed physicians. But our research shows they don’t STAY that way. Just like their “ancestors,” most of these new employed doctors tend to go on to open their own practices or become part owners in larger practices.

  • http://wwww.mgma.com Todd Evenson

    Hello,

    My name is Todd Evenson and I work as the Assistant Director of the Survey Department at Medical Group Management Association and wanted to provide a little clarification on the data found within the MGMA Cost Survey. The data is representative of the broadest spectrum of practice sizes and types in the industry. To illustrate this, I have included a graph that depicts the practice size ranges found in our 2010 Cost Survey for Single Specialty Practices:

    FTE Physicians Frequency Percent
    Fewer than 3 FTE 554 38.7
    3 to 6 FTE 399 27.9
    7 to 25 FTE 379 26.5
    26 to 50 FTE 67 4.7
    50 or more 31 2.2
    Total 1430 100.0

    You will notice in this graph that both small and large groups are represented in the sample. MGMA’s report also includes a section devoted to practices with fewer than 3 FTE physicians. This is included because the single specialty sections found in the preponderance of the report only include groups with 3 FTE physicians or greater.

    None of the data in the report is extrapolated to create these benchmarks. MGMA’s report indicates that the median total support staff* for Primary Care Practices with Fewer than 3 FTE physicians is 4.08 FTE per FTE physician- not 1.5 as described in the article.

    *Total support staff FTE would be inclusive of Business Operations, Front Office, Clinical, and Ancillary Support Staff.

    For those wanting information on larger groups, look to our multispecialty respondents to the Cost Survey. The average group size was 65.5 providers per group. See the chart below for this distribution.

    FTE Physicians Frequency Percent
    Fewer than 3 FTE 77 17.5
    3 to 6 FTE 69 15.6
    7 to 25 FTE 102 23.1
    26 to 50 FTE 65 14.7
    50 or more 128 29.0
    Total 441 100.0

    As indicated in the above charts, MGMA’s balanced dataset is not biased towards large or small practices. MGMA’s survey reports breakdown data by size, ownership, geographic region, and by population. This gives report users the unique opportunity to identify the data that best fits their needs.

    I would be happy to discuss the data with you if you need further clarification.

    Todd Evenson
    MGMA Assistant Director of Surveys
    tevenson@mgma.com